Trade of the Day: Process Analog Devices, Inc. (ADI) Stock for More Gains

Analog Devices, Inc. (NASDAQ:ADI) — Analog Devices manufactures high-performance integrated circuits for analog and digital processing applications and benefits from the continuous growth of its industrial and automotive segments. Those areas accounted for 53% of the fiscal October quarter’s revenues.

Analysts are growing very optimistic that ADI’s pending acquisition of Linear Technology Corporation (NASDAQ:LLTC) will increase its market share and margins. Standard & Poor’s notes that there are $150 million in annualized synergies, that management has done a good job of optimizing the core of their business and that the acquisition will result in improving operating leverage.

On Feb. 15, S&P raised their fiscal year 2017 and 2018 EPS estimates to $3.62 and $3.93 from $3.39 and $3.67 respectively because ADI’s January quarter exceeded estimates by 28% due to “robust” iPhone sales. And S&P forecasts an acceleration of growth in the automotive and industrial segments along with greater earnings upon the closing of the Linear Technology deal.

On Dec. 7, I reviewed ADI, and on a technical basis drew attention to the stock saying: “Buy ADI at $70 with a trading target of $82 for a proposed gain of 17%.” Last Tuesday, the stock topped at $82.87, and my hope is that those who bought it have already nailed down their profit. But it is not too late to cash in this morning at over $81 for a 15%-plus return.

However, if you purchased this innovative technology stock as a long-term investment you will probably want to hold it for a greater gain. S&P increased their 12-month target price to $87 and increased their earnings target for FY 2017 to $3.62 from $3.39.

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